Colonialism and Underdevelopment in Latin America


“Colonialism not only deprives a society of its freedom and its wealth, but of its very character, leaving its people intellectually and morally disoriented” (Franz Fanon, 1966).


This essay is going to assess colonialism and the class structure inherited as a main determinant of current development in Latin American countries. First of all, we must highlight statistics published by the World Bank: 1.4 billion people in developing countries are living under the extreme poverty. These countries are, in the majority, former colonies from different cycles of expansion of the major imperialist countries.

Certainly, the processes driven by and the legacies of colonialism are multiple and cannot be understood if reduced to only the economic dimension. However, for the purpose of this paper, the effects of economic colonization will be stressed. The economic heritages of colonization are the consequences of the process of conquering, controlling and possessing the specified regions. I also avoid a discussion of the entire 20th century in order to focus on how the colonial occupation shaped various countries.

This definition of colonialism is imprecise and broad. In an effort to be more precise, I understand it as an external/foreign exploitation assured through political control and dominance which led to a situation of dependency on the colonial power by the exploited economy.

However, there are other extra-economic implications of colonialism: it is necessarily a violent conquest and violently maintained system for the over-exploration of the conquered people. It is an inhuman system in itself, destroying any attempt at real development of the colony. Economically, it confiscates and reserves productive lands for the use of the colonizer. At a psychological level, it de-humanizes the colonized, forcefully imposing a foreign culture. It is a system sustained by a racist ideology where cultural space is developed exclusively for relations of domination. This allows for suppression and subjugation of the colonized.

Our main question is to analyze how the low level of economic performance in colonized countries is a reflex of social structures generated by colonialism. Thus, the first question which should be addressed is: Why do colonial powers established colonies? Secondly, how did they do it? Therefore, it will be possible to comprehend the current impacts and consequences of their practices.

Historical context and genealogy of the colonialism

The recent colonies (17th to 19th centuries) were established as part of the expansion of the European capitalistic production following the Industrial Revolution. European colonial powers aimed to incorporate territories which could provide raw materials and low-cost workforce, and in the process de-structuring and unmaking solid pre-capitalistic social formations.

Hence, the main goal was not the transference of the metropolitan population to populate the colony, expanding their agriculture as practiced by the Roman (and earlier) Empire(s). The economies of the colonies were designed to serve as source of inexpensive labor and natural resources, and never planned to spark internal development. This situation led to monopolistic trade-relations in benefit of the economies of the colonial powers. To ensure these monopolistic privileges, the colonial powers forcibly shaped the social and economical dynamics of the colonies.

In this sense, the colonized countries were forced to develop non-technologically intensive monocultures (ironically celebrated as “specialization”), selling unprofitably their entire production for the dominant countries. This same agro-export oriented dynamics outlined the land-owning structure, based in large properties under the (political and economical) control of non-modernizing oligarchies.

The role of these oligarchies is of fundamental importance. The local elites were major actors on political-economical scenario. Their agency cannot be ignored and their internal activity defined, organized and settled the relations of exploitation which took place in the colonies.

One of the most prominent Latin American economists, Celso Furtado, effectively explained the patterns of colonialism. According to him, the foreign country worked in interrelation with the ruling classes in the region, using authoritarian means to exclude large segments of the people from participating in political and economic control of their communities and countries with the intention of decreasing the cost of labor (when it not reduced drastically through the use of enslaved traditional populations). To sum up, Furtado states:

1. The existence of vast non-utilized areas permitted new extensive occupations of land instead of establishing a modern and intensive agriculture; 2. The profits accumulated by the local elites were wasted in the consumption of superfluous and luxurious goods for pure ostentation, rather than saving and investing in productive sectors of the national and nascent economy; 3. As consequence of the agrarian structure which extremely centralized power and wealth, a harsh situation of inequality, poverty and all sorts of privation for the majority of the society resulted. This excluded a major part of the population from the basic means of subsistence.

All these points, maintained a vicious cycle of lower productivity in colonized regions and the flow of wealth to the dominant economies.

The fate of the lest developed countries were determined in this dialectical relation where internal factors (the role of the dominant classes based in a semi-feudal order) interacted with external causes (the colonial power and its thirsty for resources and labor force).

In this historic trap colonized regions were lately incorporated in the world-market as a result of the dissolution of the direct control of metropolitan capital over the colonies and had to be accommodated according to the needs of the previous. The (historical and contemporary) massive poverty in those specified regions saw its genealogy in the original privation of access to land and housing and currently also determines the economic performance of those countries where large majorities of the working classes are unable to consume the products made in a society scarred by inequality.

Strict laws and other measures of social control were also established in the colonized countries. Even the manufacture of minimal technological products such as nails were forbidden, artificially increasing the dependence of the colonies. This is an important element of the colonial system, and it cannot be understood if its inherent contradictions are ignored: the development of the colonial country comes at the expense of the underdevelopment of the colonized.

The markets and actual economies must be looked as historically constituted. In this sense, production in the colony was determined by the colonial power’s demands. The establishment of a monopolistic relation between the colonial power and the colony not only asphyxiated the nascent industrialization, but also strangled the benefits of competition.

This historical process left the former colonies economically subordinated and disabled. Though it is important to bear in mind that the identity of the colonial power (and the type of the colonization) can be a different variable. For instance, the legacy in terms of cultural, institutional and legal heritage of the colonial power can create slight differences.

In the table below, a list of the GDP of former colonies (in South America; data in American dollars) is contrasted with their Gini coefficients, or the statistical measure of inequality. [A low Gini number indicates a more equal distribution of wealth. By comparison, the US has a Gini coefficient of about .40, while many social democratic European countries are in the .20s. – Ed.] Historically, this sample was subjected to a similar kind of colonization. In other words, the pattern of colonization was to establish centers for supplying agricultural and non-industrialized products and minerals, such as gold and silver for the colonial powers.

Table 1: Contemporary situation of former colonies in Latin America

Country GDP per capita Gini Coefficient
Argentina 8,522 .50-.54
Bolivia 1,889 .60
Brazil 8,676 .55-.59
Colombia 5,174 .55-.59
Ecuador 3,927 .50-.54
Paraguay 2,658 .55-.59
Peru 4,610 .50-.54
Source: IMF, 2008; UNDP, 2007/2008. Elaboration: the author.

Generally speaking, Latin America has shown economic growth, although the social structure imposed colonialism has been perpetuated. The region is extremely unequal, with one of the worst income distributions of the world.

The explanation for this is that the initial degree of inequality, initiated with the long process of fragmentation of local pre-capitalist and autonomous societies, followed by the enslavement of traditional indigenous populations, the transference of African slaves to the continent and, finally, the hyper-exploitation of the free (or recently liberated) working class is still affecting the actual development.

The legacy of the colonial times - the concentration of power, wealth and land - led to a stratified society with an extreme inequality. The discrimination and oppression present in those hierarchical societies are the main inheritance of the former colonies and are a persistent tragedy, being part of the unsolved questions of the recent past.


The argument that colonialism as an external imposition is the only determinant for the actual socioeconomic situation in former colonies is certainly not convincing: we have to take in account the role of local elites who have benefited from those exploitative relations.

Colonialism is part of the historical process and formation of these countries. The contemporary economies are debilitated for the following main reasons:

a) The agro-export oriented economies gave the general contours to the colonized production, forestalling attempts at industrialization and import substitution;

b) The agrarian structure excluded a majority from the access to the land and privileged a non-intensive production;

c) Concentration of income, poverty and inequality impeded the creation of internal consumption; d) the internal dynamics of the ruling classes haven't facilitated savings, (re)investments and innovation in the national economy.

Finally, the geography (or how it was appropriated by the colonial powers) gave an incentive for easy exploitation of natural resources (a necessary input to production), shaping the patterns of occupation and de-population of the colony.

The actual development policy of Latin American countries has focused on the exportation of agricultural products, repeating old economic patterns. The monoculture is mystified under the label of diversification of products. The impacts are more environmental destruction and (re)concentration of land in favor of big and old landowners. Low cost labor is once more a comparative advantage in international trade, now called "competitive" costs in the globalized world.

Years of development studies demonstrated that there is not a model or "recipe" for progress and modernization. A diversity of development policies are needed in order to face these structural problems. The developmentalists in Latin America are ignoring a very basic premise: any real attempt of development must focus on the rupture of the old colonial legacy. Otherwise, social change will purely constitute a perpetuation of actual unequal conditions.


1. Baran, P. (1957). The Political Economy of Growth. (New York: Monthly Review Press).
2. Césaire, A. (2000). Discourse on colonialism. (New York: Monthly Review Press)
3. Chen, S. & Ravallion, M. (2008). The developing world is poorer than we thought, but no less successful in the fight against poverty. Policy working research paper 4703. (The World Bank Development Research Group). Available at <>. Access in 18/11/2008.
4. Engerman, S. L. & Sokoloff, K. L. (2005). Colonialism, inequality and long-run development. National Bureu of Economic Research working paper 11057.
5. Frank, A. G. (1971). Lumpembourgeoisie: Lumpendevelopment. (Mexico: Serie popular Era).
6. Furtado, C. (1961). Development and underdevelopment. (Rio de Janeiro: Fundo de Cultura).
7. Grier, R. M. (1999). ‘Colonial legacies and economic growth'. Public Choice. Pp. 317-35.
8. Preston, P. W. (1997). Development Theory - an introduction. (Oxford: Blackwell Publishers Ltd.)
9. Sartre, J. P. Colonialism and Neocolonialism. (London: Routledge).
10. Wallerstein, I. (1989). ‘Raul Prebisch', in (J. Eatwell et al. eds.). The New Palgrave: Economic Development. (London: Macmillan) pp. 270-76.

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  • The Second Oscar – Mandela March in New York City 2015

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